Pechanga Online Poker Bill

By John Mehaffey

Eight California tribes have worked together to sponsor an online poker bill in California. The bill, that has yet to be introduced, is titled the Internet Poker Consumer Protection Act of 2013.  It would only legalize online poker in the state . Online casino games and sports betting would not be included. The bill would allow all California reservation casino operators and commercial card clubs to offer online poker to players that are physically located within the state at the time of play.

The bill would set a launch date for all permitted operators. This would prevent any single operator from going live before others to create an unfair advantage between competitors. The goal of the bill is to have all licensees launch on January 1, 2015. It would exclude any operator, software supplier, affiliate or vendor that accepted US players after the Unlawful Gambling Enforcement Act (UIGEA) went into effect in October 2006.

The bill addresses fees and taxes to be paid by online poker operators. There is a onetime license fee of $5 million. Other licensing fees are left blank in the bill. The tax rate on poker revenue is also not yet determined, though corporate taxes would be paid on revenue. All fees must be kept reasonable with tribal interests and opinions being considered at all times. Operators would also be prohibited from borrowing money from its vendors to launch their online poker platform to pay these fees.

California Intrastate Poker Only

Unlike most proposed or adopted legislation in other states, the text clearly states that California online poker would be intrastate only. There would not be any interstate compacts under this proposal. The bill also orders the state to automatically opt out of any potential federal legislation. California is the most populated US state. It would be one of the few states that could sustain the proper liquidity needed for online poker without the need to find players outside of its borders.

Local Governments Preempted

The preemption of online poker by local governments would be prohibited. Cities and counties would be unable to tax the industry and would be unable to ban their residents or businesses from lawfully participating in it. Local governments would be allowed to prosecute crimes that are committed under these regulations.

Licensing Standards

Licenses would be issues for a ten year period with automatic ten year extensions if an operator is in good standing. There is a restriction on new brick and mortar casino owners. A casino must be operating and owned by the same company for at least five years before being eligible for an online poker license. Licenses may not be transferred. Any sale of a company or property would require regulatory approval before new owners could receive an online poker license. The bill’s sponsors feel that experience is important for player trust and proper operations. Licensees would only be allowed to operate one online poker website. The domain must be registered to the licensee.

Unlawful Gambling Enforcement

Illegal and offshore operators are targeted by this bill. The Unlawful Gambling Enforcement Fund would be established to combat operators that violate the terms of this law. Companies that continue to operate in California after the adoption of this bill would be subject to asset forfeitures and other penalties.

Internet Cafes Catering to Gamblers Banned

Internet cafes that operate with the sole purpose of offering gambling would be unlawful. This addresses a current problem that is facing many states and prevents the further expansion of these gray area businesses.

Employment Requirements

All employees must be located within California. These employees would be licensed in a similar way to brick and mortar casinos. Background checks would be established and undesirable characters would be excluded. This includes all subcontractors, vendors and affiliates. There are some exceptions to this clause that include technical support and law enforcement needs under certain circumstances. Marketing through affiliates is specifically addressed and recognized by this bill, though these affiliates must be able to pass a background check that includes not violating the UIGEA.

California Online Poker Rake

While most poker rooms in other states take a percentage of the pot, California online poker rooms would not be able to drop a rake in this way. A fee would be charged either based on each stage of the hand or an entire game. A house fee on tournaments would also be allowed. It would be the same type of fee structure that is used in California’s brick and mortar online poker rooms.

Player Verification

Licensees would be required to verify a player’s identity through government records. All banking instruments used to fund an account, including credit cards, debit cards, checks and electronic checks, must include an address verification to guarantee the player is properly associated with these accounts. If the verification fails then a player will be required to submit a documentation check that includes providing a government issued identification card.

Players would not be allowed to deposit by cash or money order unless the transaction was made in person at the operator’s brick and mortar establishment. Any credit or debit card charge must disclose that it is related to internet poker on the player’s bank statement.

Any player under the age of 21 that attempts to play online poker in California may be subject to fines of $1,000 or more, depending on the number of violations. Players with unpaid tax obligations, child support, criminal fines, court costs or civil judgments would be excluded from California online poker.

Segregated Accounts

Licensees would be required to hold player funds in a segregated bank account. Credit may not be extended nor interest paid on deposits. Player to player transfers would not be allowed.

Problem Gambling

There are several problem gambling features that would be required. These include the ability for players to set daily loss limits, aggregate losses and total time played. A phone number for problem gambling help must also be provided prominently within the software.

Player Support

Player support must be available 24 hours a day, 365 days a year. Support must be based in California.

Revenue Allocation

An Internet Poker Fund will be established. Taxes collected by the fund will go towards problem gambling and the Unlawful Gambling Enforcement Fund. The Unlawful Gambling Enforcement Fund would also be funded by civil and criminal penalties imposed by entities and individuals that are found to be operating in California without a license. This department’s goal would be to enforce the law that excludes unlicensed companies from operating online gambling websites in California. All revenue that is not allocated for these two agencies would be submitted to the state’s general fund.

California Urgency Statute

This bill is considered an urgency statute. This means that the sponsors feel that the public needs to be protected immediately from the issue at hand. In this case, the sponsors wish to shield California residents from unlicensed and illegal online gambling immediately. An urgency statute requires a two-thirds vote in the state legislature to become law.

See also: SB 51 and SB 678.